By Paul Cherney From Cherney Market Analysis
I have reviewed daily charts and indicators. I still do not think that the indexes can generate a significant run higher at this time (over the next week), although there is a good possibility that prices can attempt to lift and linger sideways for a few trade days. I think I would be wrong about the ability of the markets to run higher if the S&P 500 had a close above 1228.96. The Nasdaq is the index that has the greater potential to move higher but it has not tested the 2106 (or lower) level yet. It might not, but it would have to close above the 2158.99 level for me to start seriously second guessing downside risk and some basing action for the index.
Monday's lift occurred in a thinly traded summertime market. There was a short-term oversold condition for equity indexes combined with a short-term overbought condition in the crude oil futures (short-term overbought helped by headlines that forced a spike in crude prices that enticed "sell on the news" profit-taking in the crude oil contracts and that helped equity indexes rebound).
I would still like to see some sort of a definitive sign of absolute capitulation for the equity markets. Some sort of an extreme reading that suggests that some portion of the investing public has thrown in the towel. Readings like that might be hard to come by during this summer vacation period.
Intraday resistance for the Nasdaq is Thursday's shelf at 2130-2138.46.
Intraday resistance for the S&P 500 1215-1219.
Due to the slow-motion drift during the month of August, resistance levels are stacked.
The Nasdaq has a shelf of resistance at 2139-2145.71, stacked at 2146.49-2157.98, the focus of resistance is 2151-2158. Next resistance 2165-2185.91, resistance gets thick 2177.85 and higher. Anytime immediate resistances are exceeded, they convert to supports until proven otherwise.
S&P 500 resistance is a shelf 1215-1219 then 1222.50-1225.08, and 1222.64-1227.61. A focus of resistance is created by the overlapping ranges at 1222.50-1225.08. Resistance is stacked and formidable at 1229-1239.76, but I think there would be additional upside if the S&P 500 posted a close above 1228.96. A combination of several intraday plateaus creates a focus of resistance at 1238-1242.62, but resistance runs all the way 1245.81. The next focus of resistance above 1245 is 1249.23-1267.
Next meaningful support for the Nasdaq is 2106-2039 with a focus of support 2106-2076 (very strong and should hold on first test). Has not been tested yet.
The S&P 500 has support 1206-1165 with a focus of support 1206-1183. This is a very strong layer of support, it has produced a small bounce, but if prices drop under 1200, prints 1198-1194 should attract buyers again.